There is some good news for prospective home loan
borrowers, especially younger borrowers. Banks are now becoming more
liberal in granting loans to younger borrowers. They are now willing to
offer home loans for tenures as long as 30 years to first time
borrowers.
This will help both developers as well as
Prospective homebuyers. For the property developers, it will help by
increasing demand for property, thereby helping in liquidating
inventories. At the same time, for prospective property buyers, it will
help finance a substantial portion of the cost of a new home.
The Reserve Bank of India (RBI) reduced the
repo rate by 125 basis points since January 2015. This has helped banks
reduce their interest rates on loans as well. Banks are now trying to
push the demand for credit to purchase homes. It is to be noted that
till recently banks were comfortable lending with a maximum tenure of 20
years for a home purchase. Anything beyond 20 years was considered
risky; the apprehension was that a borrower's ability to repay starts
diminishing after this period.
However, in the changed circumstances, salary
levels as well as expectations are high. Further, a loan is no longer a
bad word. Youngsters are willing to take a higher loan amount for a
longer tenure to purchase a property of their choice and need. As such,
banks have also changed their strategy and are willing to offer higher
loan amounts for longer tenures. Further, with the interest rates
softening and the push by the RBI, the EMIs reduce and there is an
increase in loan eligibility.
These long tenure loans are generally being given for
properties valued at more than 1 crore. Banks are offering these loans
to the salaried segment in the age group of 25-30 years who are at an
early stage in their careers and at the same time have the potential to
be high earners as they grow. Usually, younger borrowers have a problem
in getting a higher loan amount in the initial stages of their career.
The reason is that the salary levels are lower.
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